Hudson’s Bay Company Provides Disclosures Required by TSX in Connection with Financing of Saks Acquisition

Hudson’s Bay Company (TSX: HBC) (“HBC” or the “Company”) is making this release in accordance with Toronto Stock Exchange (“TSX”) disclosure requirements as a result of the contemplated private placement of common shares (“Common Shares”) of the Company (the “Private Placement”) to each of H.S. Investment L.P. (“HSILP”), an entity affiliated with Ontario Teachers’ Pension Plan, and West Face Long Term Opportunities Global Master L.P. (the “WF Fund”), a fund advised by West Face Capital Inc., as part of the Company’s financing of the previously announced acquisition of Saks Incorporated (“Saks”).

On July 28, 2013, HBC entered into a definitive merger agreement (the “Merger Agreement”) with Saks whereby the Company will acquire all of the issued and outstanding shares of Saks for US$16.00 per share in an all-cash transaction valued at approximately US$2.9 billion, including debt (the “Acquisition”). The Acquisition will bring together three of the retail industry’s most iconic brands – Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue – to create a leading North American retailer addressing a broad consumer spectrum across the luxury, mid-tier and outlet retail sectors. The Acquisition remains subject to the approval of the Saks shareholders at a special meeting scheduled for October 30, 2013 and is expected to close before the end of the calendar year 2013.

As previously announced, the Company intends to finance the Acquisition, and pay fees and expenses incurred in connection with the Acquisition, with a combination of US$2.3 billion of new debt financing and approximately US$1 billion of new equity. To achieve this equity target, the Company has successfully completed a public offering of subscription receipts (“Subscription Receipts Offering”), which are exchangeable for Common Shares upon the closing of the Acquisition, for aggregate gross proceeds of $275,257,500, and will, immediately prior to the closing of the Acquisition, complete the Private Placements for aggregate gross proceeds of US$750 million. For further information regarding Saks, the Acquisition and the contemplated financings, the Company refers investors to its final prospectus dated August 30, 2013 in respect of the Subscription Receipts Offering (the “Subscription Receipt Prospectus”), which is available on SEDAR at www.sedar.com.

In connection with the Private Placements and in accordance with TSX rules described below, the Company obtained the approval, by way of written consent, from its majority shareholder, Hudson’s Bay Company Luxembourg S.à r.l (“HBC Luxco”), which currently holds 78,480,211 Common Shares representing approximately 65.4% of the issued and outstanding Common Shares, on a non-diluted basis.

The TSX also requires the following disclosures, which were substantially included in the Subscription Receipt Prospectus, to be made via news release.

Pursuant to the terms of investment agreements entered into with each of HSILP and the WF Fund (the “Investment Agreements”), both of which were negotiated at arm’s length, HBC will issue, on a private placement basis, an aggregate of up to the Canadian dollar equivalent of US$500 million common shares of the Company to HSILP, and the Canadian dollar equivalent of US$250 million common shares of the Company to the WF Fund. In consideration of HSILP’s Equity Commitment and concurrently with the execution of the Merger Agreement, the Company issued 1.5 million share purchase warrants (“Warrants”) to HSILP and will issue an additional 3.5 million Warrants to HSILP upon the closing of the Acquisition. In consideration of the WF Fund’s Equity Commitment, HBC will issue 1.75 million Warrants to the WF Fund upon the closing of the Acquisition. The subscription price of the Common Shares purchased by each of HSILP and the WF Fund, and the exercise price of the Warrants, will be $17.00 per share (the “Share Price”), which represents a 2.38% premium to the five day volume weighted average trading price of the Common Shares on July 28, 2013, being the date the Merger Agreement and the Investment Agreements were entered into. The Warrants will have a five year term from the date of issue and are subject to anti-dilution provisions in certain circumstances, including upon the occurrence of any of a (i) common share reorganization; (ii) rights offering; (iii) distribution, or (iv) capital reorganization.

As partial consideration for the commitment of HSILP and the WF Fund, the Company has granted price protection to each of HSILP and the WF Fund in the event that after July 28, 2013 certain additional equity financing(s) (each, a “Subsequent Equity Offering”), whether on a public offering or a private placement basis, is made and the offering price pursuant to such Subsequent Equity Offering (the “Subsequent Offering Price”) is lower than the Share Price (a “Price Protection Event”). If such a Price Protection Event occurs, the subscription price of the Common Shares to be paid by each of HSILP and the WF Fund will be deemed to be reduced to the Subsequent Offering Price and the Company will issue to each of HSILP and the WF Fund such number of additional Common Shares that is equal to: (a) the difference between the Share Price and the Subsequent Offering Price, (b) multiplied by the number of Common Shares to be originally issued to each of HSILP and the WF Fund, (c) divided by the Subsequent Offering Price. The price protection will expire in respect of HSILP at the later of the closing of the Acquisition and the date on which the Company has completed one or more Subsequent Equity Offerings where the aggregate proceeds of such offering, together with the aggregate proceeds of each of HSILP and the WF Fund’s equity commitments, is equal to at least US$1 billion and, in respect of the WF Fund, on the closing of the Acquisition. Upon the closing of the Acquisition and the funding of the Private Placement, the price protection mechanism described above will no longer be applicable.

The commitment of HSILP further provides that in the event: (i) the volume weighted average price per Common Share, as quoted on the TSX for the 20 consecutive days immediately preceding and including the seventh business day prior to the scheduled closing date of HSILP’s initial equity investment (the “VWAP Reference Date”), is less than $12.00, and (ii) the cumulative total return (assuming reinvestment of dividends) of the Common Shares as quoted on the TSX during the period commencing on and including the date of execution of the Investment Agreement with HSILP through to and including the trading day immediately preceding the VWAP Reference Date underperforms the S&P/TSX 60 Index cumulative total return (assuming the reinvestment of dividends) over such period by 30% or more on an unannualized basis, then the following features of HSILP’s initial equity investment will apply: (i) in lieu of subscribing for Common Shares at the Share Price (or at the adjusted price following a Price Protection Event), HSILP may elect to subscribe for unlisted voting, participating preferred shares (the “Preferred Shares”) at $17.00 per Preferred Share (or at the adjusted price following a Price Protection Event) with a 30 year term, which are convertible at HSILP’s option into Common Shares on a one-for-one basis; and (ii) the expiry date of all of the Warrants issued and to be issued to HSILP will extend to the earlier of the 10th anniversary of the date of issue or five years post-conversion of the Preferred Shares. The Preferred Shares will also be convertible at the Company’s option if, at any time during the term of the Preferred Shares, the volume weighted average price of the Common Shares, as quoted on the TSX, for any 20 consecutive trading days is equal to or greater than the issue price of the Preferred Shares. The Company does not currently expect any Preferred Shares to be issued in connection with the Private Placement based on the recent trading price of the Common Shares.

After completion of the contemplated equity financing transactions, HSILP will become an insider of the Company but HBC Luxco will remain HBC’s largest shareholder, and therefore, control of the Company will not be materially affected. The Company currently expects that HSILP will subscribe for approximately 30,400,000 Common Shares, representing 16.7% of the issued and outstanding Common Shares, and WF Fund will subscribe for approximately 15,200,000 Common Shares, representing 8.4% of the issued and outstanding Common Shares, in each case, on a non-diluted basis and assuming completion of the Private Placements and the Subscription Receipt Offering and also assuming a U.S. dollar to Canadian dollar exchange rate of US$1.00 = CDN$1.03 at the time of closing the Private Placement. Taking into account the Warrants, HSILP may acquire an additional 5 million Common Shares and WF Fund may acquire an additional 1.75 million Common Shares, representing aggregate ownership percentages of 18.8% and 9%, respectively, assuming the exercise of all such Warrants. In connection with the Private Placement, however, the Company reserved a maximum of 61,250,000 Common Shares for issuance consisting of up to an aggregate of (i) 44,117,647 Common Shares issuable to HSILP and the WF Fund assuming a U.S. dollar to Canadian dollar exchange rate of US$1.00 = CDN$1.00, (ii) an additional 4,500,000 Common Shares issuable to account for any exchange rate fluctuations, (iii) 5,882,353 Common Shares issuable in the event of a Price Protection Event occurs as described above, and (iv) 6,750,000 Common Shares to be issued upon exercise of the Warrants, which, together, if all issued would represent approximately 51.0% of the current issued and outstanding Common Shares (on a non-diluted basis).

The Investment Agreements further contemplate certain governance rights, registration rights, resale restrictions, preemptive rights and standstill obligations, all of which are more particularly described in the Subscription Receipt Prospectus.

Under section 604(d) of the TSX Manual, the Company was required to obtain approval for the Private Placements from a majority of HBC’s shareholders, which approval was obtained by written consent of HBC Luxco, on the basis that: (i) the Common Shares issued in the Private Placement will dilute the Company’s issued and outstanding shares by greater than 25% triggering the requirement for shareholder approval pursuant to section 607(g) of the TSX Company Manual; (ii) the Share Price and the assumed floor price of the Common Shares reserved for issuance (being $15.00 in the event of a Price Protection Event) is potentially below the discount thresholds permitted by the TSX for a private placement pursuant to section 607(e) of the TSX Company Manual; (iii) at the time of their issuance, the exercise price of the Warrants, and the assumed minimum exercise price of the Warrants and the underlying Common Shares reserved for issuance (being $15.00 in the event of a Price Protection Event), may be below the market price of the Company’s common shares triggering shareholder approval pursuant to section 608(a) of the TSX Company Manual; (iv) the closing of the Private Placement will occur up to 270 days from the signing of the Investment Agreements triggering the requirement for shareholder approval pursuant to section 607(f)(i) of the TSX Company Manual as the closing date may be in excess of the 45 days permitted thereunder; and (v) the Warrants provide for adjustments to their exchange basis and exercise price in the event that the Company issues dividends in the ordinary course triggering the requirement for shareholder approval pursuant to section 607(e) of the TSX Company Manual.

FORWARD-LOOKING INFORMATION AND OTHER MATTERS

This news release contains forward-looking information about the Private Placement, the expected use of proceeds from the Private Placement and the Acquisition. The forward-looking statements in this news release are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from current expectations, including those related to the business generally, which are set out in materials filed with the securities regulatory authorities in Canada from time to time, including the risk factors section of the Company’s Annual Information Form dated April 30, 2013, which is available on SEDAR at www.sedar.com. No assurance can be given that the Private Placement or the Acquisition will be completed or about the timing of same. Some of the factors that could affect the closing of the Private Placement and the Acquisition include the need to obtain applicable regulatory approvals and the requirement to satisfy other closing conditions.

The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company other than as required by applicable securities laws. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date. All forward-looking information contained in this press release is expressly qualified in its entirety by this cautionary statement.

This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities being offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or pursuant to applicable exemption from registration.

ABOUT HBC

Hudson’s Bay Company, founded in 1670, is North America’s longest continually operated company. The company was purchased in 2008 by NRDC Equity Partners’ Robert Baker, Bill Mack, Lee Neibart and Richard Baker, who had previously purchased Lord & Taylor in 2006. In Canada, HBC operates Hudson’s Bay, Canada’s largest department store with 90 locations, unsurpassed in its fashion, beauty, home and accessory designers and brands, as well as thebay.com. HBC also operates Home Outfitters, Canada’s largest home specialty superstore with 69 locations across the country. In the United States, HBC operates Lord & Taylor, a department store with 49 full-line store locations throughout the northeastern United States and in two major cities in the Midwest, and lordandtaylor.com. With approximately 29,000 associates in Canada and the U.S., Hudson’s Bay Company banners provide stylish, quality merchandise at great value, with a dedicated focus on service excellence. Hudson’s Bay Company trades on the Toronto Stock Exchange under the symbol “HBC”.

E-HBC1670